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Old 10-30-2015, 04:00 PM
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Paying Mom with dependent care FSA

Hi, I'm not finding clear information online of what I need to do come tax time regarding payments i'm making to my mother from an FSA to take care of my son.

She takes care of him at my house while i'm at work.

1. Do I need to create a W-2 for her or can she just put the income in on her own somewhere when she files her taxes. If I do will i have to apply for an EIN number?

2. Do i need to do anything on my end from a filing perspective since i'm paying with an FSA? Will I have to submit any additional forms? I'm paying her exactly what I will have in my FSA for 2015 so I won't have any additional dependent care expenses that won't be covered by the FSA.

Thanks and let me know if you need additional information.



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Old 10-30-2015, 08:11 PM
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1. Do I need to create a W-2 for her or can she just put the income in on her own somewhere when she files her taxes. If I do will i have to apply for an EIN number?=====>Correct; as she is doing this in your home, this is called the nanny tax and you need to file a Sch H with your tax return next year, paying the FICA taxes, issue her a W-2 and you claim the expense on your 2441
and this is if you have paid her at least $1.7K thru the year; If you qualify for the credit, you’ll use IRS Form 2441 to claim your credit. You can use up to $3k in qualified expenses per child to calculate the credit. Your credit will consist of a percentage of the per-child expense claimed, and the percentage you receive depends on the amount of your AGI you have during the year. Your child care credit will reduce the tax on your income to zero, but not below that. If your credit equals more than your income tax, you will lose some of your credit as the excess does not carry over to future years.you do not need a EIN but you may use your SSn#.
if she is not doing in your home, but if you take your child to her home , then you do not issue a W2 BUT you need to issue her a 1099 by jan 31 next year, you still claim child care credit, she needs to file a Sch C and sch SE with her tax return. The total care expenses off-set the amount set aside in your spending account which was reported on your W-2. Then any remaining child care expenses that were not paid for by your spending account are applied toward the credit.For example: if you used $2k from a flexible spending account to pay for child care, but the dependent care cost a total of $3k (what you enter for total care costs), we calculate the credit using the remaining $1k for you.


2. Do i need to do anything on my end from a filing perspective since i'm paying with an FSA?Will I have to submit any additional forms? I'm paying her exactly what I will have in my FSA for 2015 so I won't have any additional dependent care expenses that won't be covered by the FSA.=>> As mentioned above.



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